Working Paper: NBER ID: w18286
Authors: Leemore Dafny; Subramaniam Ramanarayanan
Abstract: The majority of private health insurance in the U.S. is administered or issued by for-profit insurers, but little is known about how for-profit status affects outcomes. We find that plausibly exogenous increases in local for-profit market share induced by conversions of Blue Cross and Blue Shield affiliates in 11 states (and 28 distinct geographic markets) had no significant impact on average premiums, uninsurance rates, or medical loss ratios. However, we do find significant increases in Medicaid enrollment and a reallocation of medical spending toward rivals of BCBS. Moreover, in markets where the converting BCBS affiliate had substantial market share, fully-insured premiums for employer plans increased significantly. The results suggest that the welfare effects of subsidies for new not-for-profit insurers, such as those in the Affordable Care Act, are likely to depend on entrants' eventual market share.
Keywords: health insurance; for-profit; not-for-profit; medical spending; premiums
JEL Codes: I11; I13; L22; L33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increases in local for-profit market share due to BCBS conversions (L19) | Average premiums (G52) |
| Increases in local for-profit market share due to BCBS conversions (L19) | Uninsurance rates (I13) |
| Increases in local for-profit market share due to BCBS conversions (L19) | Medical loss ratios (G52) |
| Increases in local for-profit market share due to BCBS conversions (L19) | Medicaid enrollment (I18) |
| Market share of converting BCBS affiliates (G52) | Fully-insured premiums for employer plans (G52) |
| Market share of converting BCBS affiliates (G52) | Self-insured premiums (G52) |
| Market share of converting BCBS affiliates (G52) | Medical loss ratios of rival insurers (G52) |